Healing of large residual long bone defects associated with trauma, infection, irradiation, wear particle disease and other conditions is still an unsolved clinical challenge. These bone defects often will not heal due to their size, injury to the periosteum and endosteum, and insufficient numbers of osteoprogenitor and vascular progenitor cells. Autologous bone grafting is the gold standard for treatment, however this source can be limited in quantity or quality, and accompanied by morbidity at the harvest site. Another approach is to combine autologous harvested and concentrated progenitor cells with an appropriate scaffold to provide the elements for bone healing. We recently showed that preconditioning of MSCs with lipopolysaccharide (LPS) and tumor necrosis factor-? (TNF-?) to induce acute transient activation of NF-?B enhances osteogenesis, and improves MSCs' ability to polarize macrophages from a pro-inflammatory (TNF-?+, iNOS+) to a more favorable anti-inflammatory pro-tissue healing (Arginase 1+, CD206+, IL1Ra high) phenotype. We have also genetically modified MSCs (hereafter termed GM MSCs) to over express the anti-inflammatory, pro-tissue healing molecule Interleukin-4 (IL-4), and furthermore created a construct to first sense NF-?B activation and then increase production of IL-4 (NF-?B sensing and IL-4 secreting GM MSCs). These GM MSC would be very beneficial for bone defects in which low-grade subacute/chronic inflammation is also present, a scenario frequently seen clinically. The purpose of this grant is to accelerate the healing of long bone defects via immune modulation using preconditioned MSCs and GM MSCs, in a unique injectable macroporous scaffold, transplanted directly to the bone defect site. Specific Aim #1: To determine whether transplanted preconditioned MSCs, GM MSCs, and preconditioned GM MSCs delivered via a novel injectable macroporous hydrogel scaffold are better than autograft bone with respect to in vivo healing of: SA1a: an acute critical size murine long bone defect; SA1b: a chronic critical size murine long bone defect Specific Aim #2: To demonstrate that the above principles of enhancing the healing of acute and chronic long bone defects are valid for: SA2a: male and female mice; SA2b: younger and more elderly mice Specific Aim #3: To compare the most promising of the MSC treatments with autograft bone in a more challenging chronic critical size defect in larger and older animals: male and female elderly NZ white rabbits. We expect that addition of preconditioned or GM MSCs in a novel scaffold will lead to similar bone healing at sacrifice, compared to addition of autograft bone, but superior to addition of unaltered MSCs. Treatment with primed preconditioned or GM MSCs is highly innovative, mechanistic and directly translational to traumatic and acquired acute and chronic long bone defects in humans, and may be an effective, less invasive alternative to conventional bone graft techniques.